Highlights

  • The ATO's TR 2026/1, released on 20 May 2026, expressly covers short-term stays in a room of your own home.
  • The ATO generally treats money guests pay for a room as assessable rental income, however the stay is booked.
  • Homeowners must apportion whole-of-home costs such as interest and rates, claiming only the share that earns rental income.
  • Renting out part of your main residence can reduce the CGT exemption you receive when the home is sold.

If you rent out a spare room through a booking platform, the cash you collect is not tax-free, and the ATO's latest ruling says so plainly. Rent already sits on its list of commonly omitted income this tax time. With self-prepared 2025–26 returns due by Monday 2 November, it pays to know what to declare, what to claim and what follows a sale.

What the ruling covers

On 20 May 2026 the ATO released Taxation Ruling TR 2026/1, covering rental property income and deductions for individuals who are not in business. Two compliance guidelines came with it: PCG 2026/2 on apportioning rental deductions and PCG 2026/3 on holiday homes that are also rented out.

The ATO says the guidance reaches short-term rentals through online booking or sharing platforms, including a room in a main residence as well as entire houses or holiday homes. It sets out the Commissioner's view of the law and does not change the law itself.

Declare every dollar

Payments for a room are generally assessable, whether the stay lasts one night or several months and whether it came through a platform or a private arrangement. Board paid by family under a domestic arrangement has long been treated differently from commercial rent, and TR 2026/1 sets out where the Commissioner now draws that line.

Omitted income is a focus of the ATO's Tax Time 2026 priorities, announced on 27 April. Its examples include side hustles, cash jobs, interest and rent. Platforms also report to the ATO under the sharing economy regime, which began for short-term accommodation in 2023. Assistant Commissioner Anita Challen said in April: "Your tax return isn't the place for guesswork."

What you can claim

Costs tied only to a guest's stay are generally deductible in full. Examples are platform fees and commissions, advertising, and cleaning after a guest leaves. Costs serving the whole home, such as mortgage interest, rates, insurance and electricity, need apportioning. A common method weighs the guest's share of floor area against the share of the year the room was rented.

Nothing is claimable for periods when the room was unavailable or used privately. Capital items such as new furniture are generally not deducted outright, though depreciating assets may be claimed over time.

A worked example

Hypothetical: Tom rents a spare room for 120 nights in 2025–26 at $80 a night, earning $9,600. Platform fees ($1,440) and cleaning ($600) are claimed in full. Whole-of-home costs total $37,200. The room and shared areas make up 15% of floor area, or $5,580, and the room was rented 120 of 365 days, so the claim is about $1,835.

That leaves net rental income of about $5,725. In the 30% bracket, extra tax plus the 2% Medicare levy is about $1,832. Treat the numbers as an illustration, not a forecast.

The catch when you sell

Under long-standing capital gains tax rules, earning income from part of a main residence can mean only a partial main residence exemption applies on sale. Broadly, the exemption can shrink by the share of the home and the period used to earn income, so records of floor areas, rental periods and bookings deserve keeping for years.

Holiday homes follow separate rules. Under section 26-50 of the Income Tax Assessment Act 1997, PCG 2026/3 says a holiday home must be "mainly used to earn assessable income". If it is not, interest, rates, body corporate fees, capital works and decline in value are denied.

Centrelink and key dates

Room rent can also count as income for Centrelink and family payments. Services Australia says the ATO passes income details to it weeks after lodgment, so under-reporting can affect payments too.

Self-preparers have until Monday 2 November, because 31 October falls on a Saturday, with payment generally due on 21 November.